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Managerial Accounting vs. Financial Accounting

Accounting Finance and Accounting

When it comes to roles that are essential to keep businesses up and running, accounting is always going to be a top contender. Why? Put simply, accounting–in all its forms–is the pulse of an organization. It informs all stakeholders of the financial state of the business so managers, investors and owners can make intelligent, informed decisions to succeed.

There are several different types of accounting–from cost auditing to public accounting–but two of the most common are managerial (sometimes referred to as management) accounting and financial accounting.

If you’re exploring accounting as a career option, understanding the difference between these two types of accounting is important. This article will help you differentiate between managerial and financial accounting so you can have a better idea of which direction you may want to take in your career.

How Are Managerial and Financial Accounting Careers Different?

Even though managerial and financial accounting positions are similar in that they both deal with complex numbers, there are multiple differences in their day-to-day functions, the type of information they review and report on and with whom they communicate.

Keep reading to explore how they are different by reading what each specialization prioritizes and accomplishes. Envision yourself doing some of the tasks described for this type of accounting to begin to form an opinion on which one feels right for your personal goals. Lastly, do not overlook the higher education and certification or licensure requirements as those often help professionals choose which specialization they want to pursue.

Ready to make your move in accounting? Gain insights for every career stage in our free Accounting Career Guide.

What to Know About Managerial Accounting

Managerial accounting is a type of accounting that focuses on meeting the needs of internal stakeholders at a business. Responsibilities can include completing internal-facing tasks and creating the reports necessary to operate a business, such as monitoring and reporting on costs, sales, spending, budgets and internal financial trends. People in this type of accounting are focused on the future, and will often run “what-if” scenarios for company leadership to help them make decisions to ensure the business stays profitable. On a day-to-day basis, people in managerial accounting will follow internal rules and best practices to accomplish tasks.

What to Know About Financial Accounting

Financial accounting is a type of accounting that is focused on communicating the financial information of a company to external stakeholders, such as the IRS, creditors, investors or the U.S. Securities and Exchange Commission. They work internally to meet the needs of clients, customers, or other outside entities that do not work directly with the company but can affect or be affected by the business or projects. Typical responsibilities in this type of accounting can include gathering and maintaining historical data to create reports such as income statements, cash flow statements and balance sheets.

Unlike managerial accounting–which follows internally created rules and processes–financial accounting activities and processes must follow the Generally Accepted Accounting Principles (GAAP). According to the U.S. Securities and Exchange Commission, GAAP are the accounting standards, conventions and rules companies use to measure their financial results including net income and how companies record assets and liabilities.

Explore more differences between these two accounting specializations in the chart below.

What do Earning Potential and Job Growth Look Like in Managerial and Financial Accounting?

Despite having many differences, management and financial accounting positions are both slated to have steady growth over the next 8-10 years. The Bureau of Labor Statistics (BLS) estimates that jobs for all accountants and auditors will grow by 7% by 2030. According to the BLS, globalization, a growing economy and a complex tax and regulatory environment, are expected to continue to lead to strong demand for accountants and auditors.

As the overall demand for the accounting industry grows, so will the need to fill the various roles available under both managerial or financial accounting. Since there are a variety of positions you can choose to pursue under each type of accounting, we chose to share some of the top jobs in each category and their median advertised salaries so you can make informed decisions about your career.

Is Managerial Accounting Harder than Financial Accounting?

It’s hard to say if managerial accounting is more difficult than financial accounting. The level of difficulty will depend on your personal skills, knowledge and preferences. Here are some questions to consider when trying to decide between the two accounting paths:

Do I enjoy working closely with others within an organization?
Do I like thinking more strategically about situations?
How do I react to unexpected changes and problems?

If the answers to any of those questions seem to resonate with you, you may enjoy working in managerial accounting. Here are some questions to consider for financial accounting:

Do I enjoy learning new things and keeping up with the latest financial laws/news?
Am I extremely detail-oriented and organized?
Do I work better within a strict structure?

Depending on your answers to those questions, you may want to consider financial accounting.

Find the Right Accounting Program For You

Whether you’re interested in pursuing a career in managerial or financial accounting, the first step is getting your bachelor’s degree in accounting.

Franklin University offers a 100% online bachelor’s degree in accounting designed to help working adults earn their degrees. Franklin’s accounting instructors teach industry best-practice skills in a highly structured yet flexible program. The curriculum prepares professionals to excel in the competitive and growing accounting job market.

If you already have a bachelor’s degree, Franklin’s M.S. Degree in Accounting can help you add another valuable credential to your résumé that can help you get ahead in your managerial or financial accounting career.